International evidence on ethical mutual fund performance and investment style

Abstract

Using an international database containing 103 German, UK and US ethical mutual funds we review and extend previous research on ethical mutual fund performance. By applying a Carhart multi-factor model [Carhart, Journal of Finance 57 (1997) 57] we overcome the benchmark problem most prior ethical studies suffered from. After controlling for investment style, we find no evidence of significant differences in risk-adjusted returns between ethical and conventional funds for the 1990-2001 period. Our results also suggest that ethical mutual funds underwent a catching up phase, before delivering financial returns similar to those of conventional mutual funds. Finally, our performance estimates are robust to the inclusion of ethical indexes, which, surprisingly, are not incrementally capable of explaining ethical mutual fund return variation.

Tri-criterion inverse portfolio optimization with application to socially responsible mutual funds

“…This indicates that we cannot reject the null hypothesis, which states that the distribution function of the portfolio return of the conventional mutual funds is not significantly higher than that of the SR mutual funds, at any arbitrary significance level. Therefore, we are in line with several former studies (Bauer et al, 2005;Bello, 2005;Guerard, 1997;Hamilton et al, 1993;Kreander et al, 2005;Mallin et al, 1995;Statman, 2000) that find no significant differences in fund performance between conventional and SR mutual funds.…”

“…The financial performance of SR mutual funds is a heavily discussed area in literature (see Bauer et al, 2005;Bello, 2005;Guerard, 1997;Hamilton et al, 1993;Kreander et al, 2005;Mallin et al, 1995;Statman, 2000). We compare the implied financial risk tolerances, the overall returns, the overall risks (which we measure in terms of standard deviation), and the out-of-sample returns of the conventional and SR mutual funds.…”

Constant and variable returns to scale DEA models for socially responsible investment funds

“…Analogously, Bauer et al (2005) finds no evidence of significance differences in risk-adjusted returns between 103 German, UK and U.S. ethical mutual funds and 309 conventional funds of similar age and size in the period from January 1990 through March 2001. In addition, Kreander et al (2005) studies the performance of 30 ethical European mutual funds from UK, Sweden, Germany and the Netherlands in the period January 1995-December 2001.…”

Are they any good at all? A financial and ethical analysis of socially responsible mutual funds

“…While there are some studies that report upon a superior nancial performance of certain SRI criteria (Moskowitz, 1972;Luck and Pilotte, 1993;Derwall et al, 2005;Edmans, 2011), others nd empirical evidence of a nancial underperformance (Brammer et al, 2006;Renneboog et al, 2008a;Hong and Kacperczyk, 2009;Mǎnescu, 2011). There is also a bulk of studies which sees no signi cant differences between the nancial performance of SRI and conventional investments (Hamilton et al, 1993;Kurtz and DiBartolomeo, 1996;Guerard, 1997;Bauer et al, 2005;Schröder, 2007;Statman and Glushkov, 2008). For more details on the nancial performance of SRI, we refer to the excellent review articles of Renneboog et al (2008b), Margolis et al (2009), andCapelle-Blancard andMonjon (2012).…”